Oil prices tracked movements in stock markets at the end of the week, falling after a short lived surge nearly put Brent Crude at US$80/barrel.
A positive trend in stock markets was reversed late on Friday after the University of Michigan said that its consumer sentiment index dropped to 66.6 after sliding to 68.9 in August, hitting 2010 lows. The fading confidence among US consumer is linked to lingering fears of a double dip recession, which intensified following a series of downbeat updates on US employment and manufacturing.
The UK’s FTSE 100 dropped 0.6% after rising 1%, while the Dow Jones and S&P 500 indexes closed flat.
Brent Crude climbed close to US$80/barrel after the US Labor Department said that initial jobless claims fell 3,000 to 450,000, while an increase to 460,000 was expected.
The four week moving average, which is a less volatile estimate, dropped 13,000 to 464,750, while continuing claims are now at the lowest since 2008 after decreasing by nearly 500,000.
This week’s inventories reports provided more support for oil prices, with the data from the US Energy Department showing an unexpected drawdown of 2.5 million barrels.
On Tuesday, the American Petroleum Institute (API) said that crude stockpiles gains 3.3 million barrels last week, raising concerns about the demand in the world’s largest energy consumer.
Movements in currency markets have also been positive for oil prices with the US dollar declining against the euro after Spain conducted a successful debt auction to calm fears about the fiscal situation in the country. A weaker US dollar makes dollar-denominated assets such as crude oil cheaper for holders of other currencies, lifting demand.
Apart from the declines experienced by stock markets at the end of the week, oil prices were under pressure from an earlier than expected restart of a major oil pipeline, which connects Canada and the US. The Enbridge Energy owned pipeline was drained and shot down early in the week due to a rupture, disrupting shipments of Canadian oil to refineries in the Midwest.
However, the leaking pipeline was reopened sooner than expected and was up and running on Friday.
The pipeline has a capacity of 0.67 million barrels per day, making it the largest pipeline connection Canada and the US.
October Brent Crude declined to US$77.97/barrel, while US light, sweet crude for October delivery fell to US$73.65/barrel.
BP (LON:BP) was unchanged at 410 pence. Fellow supermajor Shell (LON:RDSB) climbed from 1,788 pence to 1,816 pence.
Cairn Energy (LON:CNE) slid from 434 pence to 428 pence and BG Group (LON:BG) declined from 1,086 pence to 1,082 pence. Tullow Oil (LON:TLW) did better, rising from 1,235 pence to 1,261 pence.
Amec (LON:AMEC) climbed from 924 pence to 943 pence, while another oil and gas engineering firm Petrofac (LON:PFC) improved from 1,371 pence to 1,395 pence.
Small Cap News
Gulfsands Petroleum (LON:GPX) reported a substantial improvement in its financial performance in H1 2010, while noting that production has increased further since the end of the period. Investors were promised that the next two years are going to be “active and exciting” with Gulfsands looking to the future with enthusiasm and optimism.
Green Dragon Gas Ltd (LON:GDG) said it is extending its network of compressed natural gas (CNG) refuelling stations in China with the acquisition of 25 new sites in Henan Province for an initial US$15 million.
Petrel Resources (LON:PET) has taken steps to hedge itself against the continued political turbulence in its main country of operation, Iraq, taking advantage of a low cost opportunity to enter a prolific oil block in Ghana.
West Africa focused oil and gas exploration group Bowleven (LON:BLVN) has commenced drilling operations on the Sapele-1 exploration well on block MLHP-5 in Cameroon, marking the beginning of its exploration campaign in the Douala basin.
European focused oil and gas exploration and production company Ascent Resources (LON:AST) has appointed former chief executive of Alkane Energy, Cameron Davies, as a non-executive director. The company simultaneously announced that legal director Malcolm Groom and non-executive director Jonathan Legg have stepped down to “focus on other commitments”.
Petroceltic International (LON:PCI) said that it is confident October’s appraisal programme on the Ain Tsila gas condensate field in Algeria “will demonstrate the value of this important asset”. While the Dublin-headquartered group has assets in Tunisia and Italy, its focus is currently on Algeria and proving up a potentially world class discovery.
Argos Resources (LON:ARG) has reported a a first half of "significant progress" as it bids to prove up potential reserves in the North Falklands Basin. The company owns 100 per cent of the PL001 Licence right next to the Rockhopper Exploration's (LON:RKH) Sea Lion discovery, which could eventually turn out to be a world class oil find. The group says seismic data reprocessing has been completed with a "noticeable improvement in quality".
After unprecedented levels of activity resulted in “outstanding progress” during the first half, Gulf Keystone Petroleum (LON:GKP) is anticipating further success in Kurdistan in 2010 with a cash balance ten times greater than a year ago.
Large and Mid Cap News
Tullow Oil (LON:TLW) said the Owo-1 exploration sidetrack in the Deepwater Tano licence offshore Ghana has significantly extended the column of high quality light oil discovered by the Owo-1 well. Results of drilling, wireline logs and samples of reservoir fluids confirm that Owo is a major new oil field.